A Near-Failure Brings a Lesson in Leadership

Matt Mayberry

It’s pretty unusual for top-level executives to admit that they got something wrong, let alone do it with openness and humor. But that’s exactly what happened during the inaugural session of one of our immersive “practice field” business simulations, and it gave me an important lesson in leadership.

The execs in question worked for a Fortune 500 company, and were teammates in a simulation that challenged three groups of leaders to bring change to a fictional version of their business under varying market conditions. When I developed and tested the simulation, I included a fairly severe recession, to test teams’ resilience and force some tough decision-making.

Cutting corporate spending (e.g. on Selling, General & Administrative expenses) is typical in a downturn, and all the teams in the simulation reduced their SG&A spend – but the team with the execs got a little carried away.

Cutting corporate spending (e.g. on Selling, General & Administrative expenses) is typical in a downturn, and all the teams in the simulation reduced their SG&A spend – but the team with the execs got a little carried away. They cut marketing so deeply that their sales dropped more than it would have, which led to a sharp falloff in service fees charged by the business. Those fees supported brand marketing, so their reduction led to a further loss of sales. In response, the team cut SG&A even more, which prompted a further drop in sales, more loss of fees, and so on. A true death spiral.

At the trough of the recession, the stock price for the team’s virtual company had plummeted from $60 to $3, and it looked like they might not recover. The other two teams were also struggling, but their financials were in better shape, and they were beginning to turn things around.

So, midway through my first program with a new client, I was faced with the prospect of a senior-level team crashing and burning. I had an anxious evening, imagining what the executives might be thinking about their performance and the service I was providing.

On the last day of the simulation, the executive team recovered, thanks in part to improved market conditions in the model, and in part to their debt-funding of sales and marketing. However, they still finished last among the three teams, in terms of revenue, profitability, and stock price.

To my surprise, they did not make excuses, blame one other, or criticize the simulation. Instead, they were good-natured and open during their final presentation to the full group, acknowledging their valuable lesson about how over-reacting to a downturn can set off a vicious cycle.

To my surprise, they did not make excuses, blame one other, or criticize the simulation. Instead, they were good-natured and open to the full group, acknowledging their valuable lesson.

Moreover, they spoke with perception and humor about how dysfunctional team dynamics had gotten in the way of good decision-making, and how they fell into old behavior patterns rather than paying attention to facts. Learning by failing was a valuable experience, they said – and that made a noticeable impression on the other participants, and in subsequent leadership programs where they served as faculty.

This perspective is critically important as business leaders come to grips with our current age of rapid change and uncertainty. Traditionally, it’s been considered a virtue when managers are assertive, persuasive and pugnacious, expressing no doubts about their strategies. We tend to favor intellectual simplification, and reward forcefulness and quick problem resolution, even if it is a quick fix. In a forthcoming article in Business and Society, my co-author Bill Throop and I refer to these as “Conviction virtues.”

While Conviction virtues have certainly contributed to many success stories, they can take a toll if they’re allowed to limit creativity and learning within an organization, or if more time is spent justifying confidence than on assessing situations. They also work strongly against admitting that you’ve done something wrong, which is a prerequisite to learning from mistakes.

The executives in our simulation, by contrast, were demonstrating what our article calls “Humility virtues --” curiosity, open-mindedness, and an emphasis on seeking wisdom from others and collaborating. These are essential to cultivating organizational agility, and avoiding overdependence on old success formulas in a time of change and disruption.  

By opening up about their performance, the execs sent a clear message to the participants in their program and all subsequent ones: “Making mistakes is OK as long as you learn from them, and you shouldn’t let your ego get in the way of your development as a leader.” That insight, and my admiration for the people involved, have stayed with me ever since.

By opening up about their performance, the execs sent a clear message to the participants in their program and all subsequent ones: “Making mistakes is OK as long as you learn from them.” 

If you’re a leader and want to encourage more risk-taking and experimentation in your organization, try sharing a story with your team about an embarrassing mistake you made, and what you learned from it.

Or, better yet, show them how it’s done - find a way to fail productively and publicly in front of your team. It takes courage, but can speak volumes.